its counsel assumed a hostile position to complainant in said test suit before the Court of Appeals. It asserted various hostile positions, some of which were not insisted on by the then defendant. It set up title in itself to the Pike patent, No. 595,864, an alleged infringer of the Felt patent in suit. It asserted the Felt patent to be an abandoned experiment. It substantially sided with the original defendant. It charged various acts calculated to invalidate the patent in suit, such as delay, abandonment, the Pike patent as an anticipation, Felt's misrepresentation to the Patent Office-all this in face of the well-known doctrine that a licensee may not be heard to contest the validity of his licensor's patent. "A licensor," says our Court of Appeals in Indiana Mfg. Company v. J. I. Case Threshing Machine Company, 154 Fed. 365, "has the right * * to appellee's (the licensee's) silence respecting the validity and prima facie scope of the patent." It further appears that it was to defendant's advantage to have the patent declared invalid, since large payments were thereby avoided. Complainant insists that the defendant's course in the former case amounted to both a breach and repudiation of the license contract; that defendant, after said decision, proceeded to ally itself with another infringer and entered upon other alleged infringements; that it has by its silence apparently acquiesced in the annulment of the contract by complainant up to the time of bringing this suit, i. e., more than 18 months; that it has made no attempt to pay royalty, has made no reports, nor has it marked its machines under the patent in suit.

*

All and each of the foregoing allegations are deemed to be fairly established by the record. The question of breach of the express provisions of the license contract need not be here considered, as all payments by it reserved were duly satisfied up to the time of the adverse ruling in the Court of Appeals. Thus there is presented, not a case of cancellation of license for failure to comply with its terms, but one of alleged repudiation and abandonment by defendant, duly accepted by complainant. Whatever may have been defendant's attitude with regard to the declaration of complainant concurring in what it considered an abandonment and repudiation of the license, at the time it was made, it is apparent now that, if defendant can cover itself with the mere shell of the contract which remains, it cannot be reached by complainant, since, in the absence of such bad faith as complainant alleges, on the hearing, amounting to a repudiation duly accepted, manifestly, by the terms of the contract, it would be immune. It is therefore greatly to defendant's advantage that the license be held to remain in force. The license is set up by way of denying complainant's right to the relief prayed for and "as showing the lawful right in defendant to do what it had done and as a ground for dismissal of the bill, because it had not infringed the patent, notwithstanding it had committed the acts complained of." The question, therefore, is whether the action of defendant in filing its brief in the original case. of this complainant against the Universal Adding Machine Company amounted to an abandonment of the contract on its part. The record leaves no doubt in the mind of the court that the defendant, under the guise of amicus curiæ, undertook to and did supply the Universal Company on that hearing with citations from the record and argu

ments which must have contributed materially to the adverse opinion thereafter rendered by the Court of Appeals. It does not appear that what was done and said was reprehensible otherwise than as coming from a licensee, or one charged with the duty of refraining from taking any action which might militate against the validity of the patent then in suit. A person may not assert rights under a patent as against all save the patentee and at the same time assail the latter's right to assert validity. Defendant's offense here consists in filing a brief, and otherwise manifesting vigorously a desire to have the patent declared invalid, and lending material assistance to that end. It does not appear that any change in the form of the record was undertaken by defendant herein.

It is a familiar rule that a party may not enter into a contract to do or pay something upon the happening of a certain event, and then. proceed to make the happening of the condition impossible, and such a course is held to be ground for the cancellation of a contract; but, in the absence of a special condition of the contract to that effect, a licensor cannot by his own act revoke and terminate a license contract. He may file his bill for a rescission, but cannot terminate it by his own declaration, especially when some part of it has been performed. "The law does not arm one party to a contract," says Judge Gray in Standard Dental Mfg. Co. v. National Tooth Co. (C. Č.) 95 Fed. 291, "with the power to determine in his own favor a condition of this kind, and thus produce for the other party to the contract all the disabilities and consequences that would follow a forfeiture legally ascertained and declared. Even where the contract provides that the failure to pay shall render it null and void, the defendant has a right to be heard as to the facts upon which such annulment is made to depend. Forfeitures are not favored in equity, and the best-considered decisions hold that even licenses containing express stipulations for their forfeiture are not, ipso facto, forfeited upon condition broken, but remain operative and pleadable until rescinded by a court of equity."

In Hartell v. Tilghman, 99 U. S. 547, 25 L. Ed. 357, the court says: * We do not agree that either party can of his own volition declare the contract rescinded, and proceed precisely as if nothing had been done under it. If it is to be rescinded, it can be done only by a mutual agreement, or by the decree of a court of justice."

The same rule is held to in Wilson v. Sandford, 10 How. 99, 13 L. Ed. 344, and in Hanifen v. Lupton (C. C.) 95 Fed. 465, and McMullen v. Bowers, 102 Fed. 494, 42 C. C. A. 470.

We hold, therefore, that the license contract was not made void by the several acts of the parties thereto as above recited, that it is still in force, and that the plea which is hereby held to constitute a valid. defense to the bill should be and is sustained. It may be that, as above suggested, the court would, under a bill framed for that purpose, have jurisdiction to annul or rescind the contract should the facts justify such action, since there exists the necessary diversity of citizenship. Inasmuch, however, as a decree of annulment would take effect as of the date thereof, it is evident that no infringement could be shown as

of the date of filing the bill, since any act done by defendant in respect to the patent in suit was done under the then existing license.

It is therefore our opinion that no suit can be maintained under the provisions of the patent act until the license has been annulled by decree of court.

COMPTOGRAPH CO. v. BURROUGHS ADDING MACH. CO.

(Circuit Court, N. D. Illinois, E. D. December 29, 1909.)
No. 29,538.

1. PATENTS (§ 211*)—LICENSES-CONSTRUCTION OF COntract.

By a license contract between complainant as owner of a patent and defendant, an alleged infringer, complainant released defendant from all claims for past infringement, granted it a license for the full term of the patent, and agreed to bring suit against an infringer to establish the validity and scope of the patent, while defendant agreed to pay a sum in cash, a royalty on all machines made prior to the final decision in such infringement suit, not later than a stated time, and an increased royalty thereafter should such decision sustain the patent, with the privilege of terminating the contract should it be adverse. Held, that the effect of such contract, on the payment of the initial sum and the royalties to the stated time, was to vest defendant with license during the term of the patent as under an executed contract; the payment of further royalties, only, being contingent on the result of the suit.

[Ed. Note. For other cases, see Patents, Dec. Dig. § 211.*]

2. PATENTS (§ 214*)-LICENSES-GROUNDS FOR CANCELLATION.

The fact that a licensee under a patent for the full term of its life under a contract which he has fully executed by payment of the agreed consideration, although he was to pay further royalties if the patent was sustained in an infringement suit brought by the licensor, by leave appeared in the appellate court in such suit and filed a brief in aid of the defendant, attacking the validity of the patent, which was adjudged void, does not entitle the licensor to a cancellation of the license contract.

[Ed. Note. For other cases, see Patents, Dec. Dig. § 214.*]

In Equity. Suit by the Comptograph Company against the Burroughs Adding Machine Company. On demurrer and exceptions. Demurrer sustained, and bill dismissed.

John W. Munday, for complainant.

Robert H. Parkinson and Edward Rector, for defendant.

SANBORN, District Judge. Hearing on demurrer and exceptions. This is the second suit between the parties, and is brought to cancel a license contract. The first action was an ordinary infringement case on the Felt patent, No. 628,176, in which defendant pleaded the license. Issue was joined on the plea and testimony taken on the theory that defendant had by its conduct renounced the license, and that complainant had elected to accept such renunciation, thus in effect canceling the license by agreement. The parties being citizens of different states, and the necessary jurisdictional amount being involved, this issue was properly triable in the infringement suit, and resulted in a decree dismissing the bill upon the ground that no agreed renunciation was shown, and that although there might be ground for a cancellation in court, until actually so adjudged the license still remained in force.

*For other cases see same topic & § NUMBER in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

Comptograph Co. v. Burroughs Adding Machine Co. (in this court, 1909) 175 Fed. 787.

Thereupon this suit was brought in equity for the cancellation of the license upon the ground above indicated.

On January 20, 1904, the Arithmometer Company and the complainant entered into a license contract or agreement, a copy of which is attached to the bill. Subsequently the Burroughs Company, defendant, succeeded to all the Arithmometer Company's rights under the said license contract and was duly recognized as the licensee thereunder by the complainant. By this contract the licensor released from all claim for back damages or royalties, amounting to not less than $70,000, and granted a license to make, use, and sell the patented machine, exclusive of everybody except the licensor. For this the licensee was to pay a nominal royalty of $1 per machine, alleged to be about onefourth of 1 per cent. of the selling price, during the pendency of a certain test suit which the contract required the licensor to bring against an infringer for the purpose of demonstrating and establishing the validity of the said patent and stopping infringement. If the test suit were successful, the contract required the licensee to pay a reasonable royalty of $10 and $5 per machine, in case the courts sustained the patent. In case it had been paid, it would have amounted to more than $100,000 for the first year. During the whole time it was paid, and including the $5.000 advance payment, it amounted to no more than $12,209, while the complainant paid out on account of such expenses the much larger sum of $14,521.

The material provisions of the license contract are as follows: In consideration of $5,000 paid down, complainant releases defendant's assignor from past infringements. It then grants the sole right, exclusive except as against the licensor, to make, use, and sell the patented invention during the full patent term (except as to certain mechanism not in question here). The licensor also agrees to promptly bring suit against existing and future infringers, and diligently and vigorously prosecute to a final determination, for the purpose of judicially determining the scope and validity of the patent, suppressing infringements, "and securing a monopoly of said invention to the parties hereto." Defendant's assignor agrees to pay royalties as follows: (a) On all machines made by it during the pendency of the first suit of the infringement litigation and prior to its final determination (but not later than December 31, 1905), $1 per machine. (b) On all machines made after a final determination of such first suit which should result in an adjudication establishing the validity and scope of the patent in such manner as to control and monopolize under it all adding machines employing transversely-movable wide-frame paper carriages, $10 per machine until the amount should reach $200,000, and $5 during the remainder of the patent term and any reissues and extensions. It further agrees to pay $10,000 prior to the final determination of the first suit, on account of the $10 royalty; the $5,000 paid down to be taken as part of the $10,000. The concluding paragraphs of the contract are as follows:

"(7) This contract is based upon the assumption that the aforesaid letters patent are good and valid in law, and that they can be and will be sustained

by the courts and given a construction which will secure to the parties hereto a substantial monopoly of the manufacture, use and sale of all adding machines employing a transversely-movable wide-frame paper carriage, and is to be construed and enforced between the parties accordingly, and if, as a final result of the litigation hereinbefore mentioned, or as a final result of any subsequent litigation upon said letters patent, said letters patent shall be declared invalid or shall be so construed by the court as to fail to substantially cover and control all adding machines employing such transversely-movable wide-frame paper carriages, then, and in such event, said second party shall have the right to surrender this agreement and license and be relieved of any further obligations thereunder.

"(8) Said second party shall not be precluded or estopped by the contract and license from manufacturing, using and selling adding machines which do not embody the invention described and claimed in said letters patent, as same may be adjudicated and construed by the courts, but shall at all times have the same right and liberty of manufacturing, using and selling machines not embodying said invention as have other persons not parties thereto."

The inducement to the license contract is thus stated in the bill: "Your orator further shows unto your honors that the American Arithmometer Company, a Missouri corporation at St. Louis, Mo., and which was the predecessor of the Burroughs Adding Machine Company, the defendant herein, was in the year 1900 engaged in making and selling tabulating machines that were an infringement upon said letters patent to Felt, and were in that year notified by or on behalf of said Felt & Tarrant Manufacturing Company to desist from such infringement. But though a considerable correspondence was had in relation to the matter between the counsel for the two companies, no settlement was arrived at until after the ownership of the said patent to Felt passed to your orator, the said American Arithmometer Company continuing to make and sell the said infringing machines despite the protest and notice of the said Felt & Tarrant Manufacturing Company, and your orator, until some 7,000 machines had been made and sold in infringement of said patent. That machines of this kind are expensive, and these machines sold for more than $300 each, to wit, for $400 or thereabouts, and that a small royalty fee under the patent from a licensee ought not to be less than $10 per machine in any case, and had such a reasonable royalty been paid by the defendant and its predecessor on the said 7,000 machines it would have amounted to at least $70,000. Your orator further shows unto your honors that, so being the owner of the said letters patent to Felt, and so having notified the said American Arithmometer Company of the said infringement thereof, your orator entered into negotiation with said company looking to a settlement of the existing differences between them. And as a result of such negotiations your orator and the said company entered into a license agreement in writing signed and sealed by your orator and by the said American Arithmometer Company, and dated January 20, 1904."

Pursuant to the contract complainant brought suit April 19, 1904, in this court against. Universal Adding Machine Company, impleaded as Universal Accountant Machine Company, for infringement of the Felt patent. This was the "first suit" referred to in the license, and was successful in the Circuit Court. 142 Fed. 539. Upon this decision being made, defendant caused the fact to be extensively advertised, and caused circulars to be printed warning users of the danger of buying the Universal Company's machine on account of infringement. This was against complainant's expressed wish. The Universal Company was thus very greatly injured and a large amount of its trade thereby diverted to the defendant, to its benefit, as complainant is informed and believes, $50,000. The case was taken to the Court of Appeals. 146 Fed. 981, 77 C. C. A. 227.